ANALYSIS: What the Supreme Court Decision Means

Sketch of the Supreme Court justices hearing the health care reform case in March by Bill Hennessy.

The U.S. Supreme Court today upheld the landmark federal health law, affirming its mandate that nearly all Americans carry coverage and retaining sweeping changes to the health industry.

Chief Justice John Roberts Jr. joined the liberals on the court in upholding the mandate, deciding the penalty for not carrying insurance is a tax and therefore falls within Congress’ taxing power. But the justices voted to set limits on the law’s expansion of Medicaid, the federal state program for the poor, leaving up to states to decide whether to participate.

While the decision bolsters the Obama administration’s signature legislation, it complicates efforts to create nearly universal health coverage if states opt out of the Medicaid expansion. Many Republican governors had hoped the court would strike the Medicaid expansion.

The decision leaves intact the remainder of the mammoth law, which requires insurers to accept all customers regardless of their health status, provides tax credits to those who need help to buy coverage, fines some employers who don’t offer insurance and provides billions to expand Medicaid to include many people not currently covered in many states. Those provisions go into effect in 2014.

“I’m disappointed and shocked that Justice Roberts led the charge to uphold the constitutionality of the mandate and called it a tax,” said Bill McCollum, who filed the first state lawsuit against the act when he was Florida’s attorney general. “I certainly don’t think it’s a tax. It’s a sad day for the American people.”

Long in the making – at least five previous presidents tried and failed to pass legislation with similar aims – the law remains controversial two years after its passage.

While the ruling removes some legal uncertainties, a slew of political and technical challenges remain. The law and today’s decision are sure to feature prominently in the run-up to the November elections and the law’s fate could well hinge on the outcome. If Democrats retain the presidency and control of the Senate, implementation will likely move forward. If Republicans sweep one or both, efforts to repeal or defund are sure to gain steam. Presumptive GOP presidential nominee Mitt Romney has vowed to repeal the law if elected.

“The election is two or three times the importance of court decision,” said Robert Laszewski, a consultant to the industry and former insurance executive.

While the majority opinion upheld the law’s requirement that nearly all Americans carry health coverage or pay a penalty, polls show the mandate remains hugely unpopular. Without that provision, however, most experts say that young and healthy people would forego insurance, leaving primarily sick and older people needing expensive medical care in the pool, and driving up the cost of premiums for everyone. The issue is likely to become fodder for the campaign trail.

Democrats “will try to use this to segue from ‘it’s legal,’ to ‘it’s great, even the court thinks so’,” said David Merritt, a senior advisor with Leavitt Partners, a health consulting firm founded by former Bush administration cabinet member Michael Leavitt.

Republicans, Merritt said, “will use it to try to raise the stakes of the election: ‘This is the last chance we have to repeal this thing.'”

Florida’s McCollum predicted the law’s survival would energize attempts to defeat Obama in November elections and repeal it.

“If the president is re-elected, then this law will go forward,” he said. “If he isn’t, then I think there will be a different outcome in the health care arena.”
Impact Of Medicaid Ruling

State politics, meanwhile, will come into play on the ruling on the Medicaid expansion. The ruling gives states the option not to expand eligibility without losing funding for their existing program. They would, however, lose billions in additional federal funding that would have covered newly eligible residents up to 133 percent of the federal poverty level, or about $30,000 for a family of four. Today, about 60 million people are enrolled in the program.

Sara Rosenbaum, health policy professor at George Washington University, said she expects “the overwhelming number of states” to adopt the Medicaid expansion.
“The pressure to participate will be enormous from health care providers and communities,” she said. “The majority of states will not want to have its poorest residents without coverage.”

Signed into law March 23, 2010, after being passed without a single Republican vote, the health care legislation was promptly challenged, with 27 states filing or joining lawsuits challenging its constitutionality. Republicans argued the law was an overreach of federal authority and that its new taxes and fees would hurt the economy. Democrats said that slowing health care spending with provisions such as a powerful advisory board to curb Medicare costs and the so-called “Cadillac tax” on high-cost insurance benefits, would boost the economy. At the same time, the law would provide relief to millions who could not afford or qualify for insurance coverage.

The Congressional Budget Office, a nonpartisan government agency, estimated it would add up to 33 million people to the insurance rolls by 2016. Still, about 26 million people are expected to remain uninsured, many of them undocumented immigrants.

The law makes few changes for people who get their coverage through their jobs, which is the main way most insured people currently receive insurance.
Most employers who provide coverage say they will not drop it in 2014, even though the $2,000 to $3,000 in penalties on those who don’t offer affordable coverage is less than what many pay for insurance.

Still, the CBO estimates that about 3 million to 5 million people who otherwise would have had employer coverage will lose it. Some of those workers will be eligible to buy insurance through new state marketplaces, some with subsidies to help them pay for it.

Implementing the law is estimated to cost about $1 trillion over nine years, much of that for the insurance subsidies and expansion of Medicaid, according to the CBO. That is slated to be paid for through savings wrung from Medicare, along with new taxes on industry and high income earners.

Gearing Up For Deadlines

The high court’s decision comes a year and a half before January 2014, when some of the most significant changes called for in the law take effect. Those include the launch of new state-based marketplaces where consumers will shop for coverage, the fining of employers with 50 or more workers who fail to provide affordable coverage and the expansion of Medicaid.

But whether the federal government and the states will be able to meet the deadlines is far from certain. An estimated 17 states were awaiting today’s decision – and in some cases, the outcome of the November elections — before moving ahead to set up the online marketplaces where consumers will shop for coverage and check eligibility for tax credits to help them buy.

To date, only 14, including California, Colorado and West Virginia, as well as the District of Columbia, have authorized creation of the marketplaces.

States that waited for the court decision may find they have run out of time since they must submit a blueprint for the marketplaces by Nov 16.

“We could have 20 or 25 states not ready,” said Laszewski.

In addition, many must resolve a host of technical challenges, including revamping aging computer systems, to prepare for increased Medicaid enrollment – and to link with federal agencies, such as the IRS, to help determine applicants’ eligibility for Medicaid or tax subsidies.

Today’s decision “doesn’t resolve any of the technical aspects the states are facing,” said Joseph Antos, a health policy scholar at the conservative American Enterprise Institute.

In addition, insurers, employers and industry leaders say they don’t have all the guidelines they need from federal regulators. Federal officials, meanwhile, are navigating technical and political issues surrounding the marketplaces.

The law says the federal government will run the exchanges in states that are unable or unwilling to do so. Many policy experts say delays by governors reluctant to implement the law, coupled with technical difficulties, means that the federal government may be overseeing all or part of the vast majority of state-based marketplaces.

“The feds still have so much to do. So there’s a sigh of relief [that the court ruling was favorable] and things are moving ahead, but they’re also terrified that things are moving ahead,” said Merritt at Leavitt Partners.

Health Providers Already Changing

The private sector, in contrast, has already taken significant steps.

Doctors, hospitals and insurers have begun changing the way they do business as they prepare for an influx of new customers and federal incentives aimed at slowing health care spending by rewarding increased coordination among medical providers. Some are creating so-called “medical homes,” where care is coordinated and financial savings are shared among doctors, hospitals and other providers.

“The train is really well out of the station at this point,” Sara Collins, a vice president at the Commonwealth Fund, a health foundation in New York City told Kaiser Health News earlier this month. “Insurance carriers are already functioning in this new world that they’re living in.”

The American public, however, remains split on the law. A New York Times/CBS poll released in early June showed that two-thirds of Americans wanted the court to strike down at least part of the law, while 24 percent wanted the entire legislation kept in place. Most, however, knew little about the law’s provisions.

The court decision “is not necessarily going to make the law more popular,” said Robert Blendon, Harvard professor and polling expert. “It’s almost impossible to move people’s views one way or the other.”

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

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